Macao’s gambling revenues set for an August pickup: Jefferies  

Macao’s gambling revenues are set for a possible revival in August following the conclusion of this year’s World Cup. However, any bullish enthusiasm should be tempered due to the high base from 2025 and renewed scrutiny of mainland capital outflows, experts say.

In a sector note published earlier this month, analysts at Jefferies, a brokerage, identified a potential pivot back to Macao to coincide with a robust IPO pipeline in Hong Kong, prompting a wealth effect to spur Macao’s gambling revenues in the second half of this year. 

[See more: Macao’s gambling revenue dips in the second quarter, as football bets rise]

After a negative reading during the second quarter, the investment house is penciling gross gaming revenue (GGR growth) of 2 percent in the third quarter and 4 percent in the final three-month period of this year. For the month of July, Jefferies forecasts GGR to contract 8 percent versus the market’s estimates of a 6 percent drop. 

Looking past the World Cup effect, Jefferies says that a low- to mid-single digit GGR reading against double-digit growth last year would represent a solid outcome for Macao’s gambling revenues and help restore market confidence in the medium term. Based on industry checks, GGR was up 9 percent from the previous week ending July 19, the conclusion of the World Cup, underscoring the pickup in momentum, the report reads.

Historical dip in Macao’s gambling revenues

Though difficult to quantify the tournament’s full impact, historically, the World Cup and European Championship have decelerated GGR growth in June and July when compared to the January to May period, according to analysis by Bloomberg Intelligence (BI).

During the 2018 World Cup in Russia, annual GGR growth slowed to 11 percent during the two-month period compared with 20 percent rise during the first five months of the year. A similar dynamic played out in 2014 when Brazil hosted the World Cup. GGR declined 4 percent during tournament play but rose 16 percent earlier that year. 

[See more: Earnings outlook subdued as Macao casino margins tighten]

The historical dip overlaps this year’s expanded format, featuring 48 teams playing across 104 matches compared to the 32 that played in 64 contests four years earlier. And given the industry shift away from VIP players to the premium mass market, any GGR reading could be more cyclical, BI says. 

The sector is set to kick off earnings announcements this Thursday with Sands China publishing second quarter numbers. Jefferies is expecting the company to report adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$538 million, representing a 5 percent decline. The analysts noted that, during the company’s first-quarter call, management cautioned for a seasonally softer second quarter, but suggested the current US$600 million run rate was a solid base from which to grow.